Why Hiring Mistakes in Sales Are Even More Costly Than You Think

January 16, 2019

Today, United States firms spend about $900 billion annually on the deployment of professional sales organizations. That’s more than 3x their total spending on advertising, more than 20x their spending on digital marketing, and more than 50x their current spend on social media.

Selling is, by far, the most expensive part of strategy execution for most firms. At a minimum, CEOs and Senior Executives must fully understand what drives both efficiency and effectiveness within the sales organization. This is not always easy, as sales is generally not considered a discipline along the lines of finance, marketing or engineering, and as such, many executives do not have the background or context to fully understand the levers that can be adjusted to improve overall sales effectiveness.

Investing time and effort to improve sales effectiveness will pay big dividends. There is no single area where the impact can be greater than in hiring and retaining the right sales talent. Just getting the correct talent can double overall firm revenue with no incremental headcount. Each mistake in a typical business to business complex sale environment is likely to cost your firm more than $1 million – each one. In recurring revenue models where valuations are driven off a multiple of revenue, talent mistakes quickly balloon into huge numbers from an enterprise valuation perspective – think $4 to $6 million unrealized enterprise valuation for each hiring mistake.

The Importance of Talent

In many (I’d argue most) companies today, there is still a version of the 80/20 rule that exists. A small minority of the sales organization typically produces a disproportionate level of the results. Sometimes this ratio is 90/10 (less than 10% of the total sales headcount drive 90% of the revenue), or sometimes it is 65/35. Regardless, in nearly all cases, at a minimum, the bottom 20% of the sales force is not remotely competent for the role they are in. This situation has largely remained unchanged over the past 30 years, due in no small part that despite overwhelming evidence that in the intermediate to long term, the quality of talent a firm is able to hire and deploy is the most important business discipline and the only sustainable competitive advantage for a business.

Ironically, recruitment is also, in most cases, the least disciplined process in the business. Hiring is often done without the level of rigor and science that can and should be applied. Hiring decisions are made without a full understanding that every sales role for every company at every stage of the company’s life cycle are different. Candidates are often selected after just a couple pf interviews, despite the evidence that even skilled interviewers are unlikely to be able to accurately predict performance based solely on interviews. Many firms still do not routinely use predictive assessment tools, or they fail to properly calibrate these tools to the roles that are unique to their company. Further, firms do not engage in a pattern of continuous recruitment and instead recruit only when there is a need, which leads to suboptimal hiring decisions.

Hiring talented, top-tier people with the potential to grow with the company is the goal of any leader. But how do you define talent in the context of the specific position? How do you recognize it in a candidate? More importantly, how are you enabling your front-line managers to assist in recruiting and continually coach the talent that you’ve worked so hard to get

When deciding how to make the right hires, here are a few essential questions to consider:

Should one value experience over potential?

Do you have adequate training resources to bring the less experienced new hire up to speed quickly?

How important are academic credentials?

How much can you rely on the candidate’s past success?

What if a person has worked for you before in a different firm or in a different capacity in the same firm?

How important is fitting in with the company culture?

Putting rigor behind the way you hire and retain high-performing sales talent is critical to your long-term success. Without the right people in place, you will struggle obtaining profitable revenue growth. Based on decades of recruiting, hiring, and retaining high-performing sales talent, the following five principles will improve your odds of reducing bad turnover and retaining top performers.

Principle One: Define the job and the selection criteria

Before beginning a search for the perfect candidates to fill needed roles, you need to define each position in terms of its specific goals and responsibilities. Take the time at the front end to define the job and the criteria with sufficient rigor and discipline so that you’ll be able to hire the right person.

Principle Two: Process and discipline

Put in place some sort of recruitment process, and one that has process and discipline associated with it. Set up a procedure to follow including standardized assessments for all candidates and create a fact-based profile for candidates that correlates scoring with high performance. Implement a structured interview process with a set of questions specific to the role.

Principle Three: Don’t settle for mediocrity

Studies have shown that the cost associated with hiring the wrong person is far greater than the cost of leaving an existing position unfilled. If you are not really excited about the person you are considering hiring, keep interviewing. Settling on the best candidate of those that are left in the process, but not someone you are thrilled with, inevitably leads to suboptimal decisions and downstream turnover.

Principle Four: Enable your managers

The impact that your managers have on new hires is significant. People will quit their bosses before they ever quit the company. Still, the role of the managers is often neglected, as the majority of the focus lies with rep level activities. Enable your managers with the right processes, content and tools to:

Delegate and promote top performers.

Train and develop “B” players

Manage out lower performers.

Principle Five: Always be recruiting

Good people can come from any number of sources, and you need to remain vigilant to find talent. You always need to be prepared for someone leaving, someone you need to fire or the person who will leave your team because he/she has been promoted. Develop a rhythm around building up your recruiting bench True top-tier talent is rare; you have to be searching for it all the time.

Your organization is only as strong as its people. As you build your business and gear up for strong growth, a relentless focus on getting your hiring strategy right is the surest way to achieve your goals. Most importantly, recognize the acquisition, development and retention of talent as the most important role for each manager and leader. Paying attention to this will do wonders to drive growth in your business.